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War, Trade and Natural Resources: a Historical Perspective

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War, Trade and Natural Resources: a Historical Perspective War, Trade and Natural Resources: A Historical Perspective Ronald Findlay, Columbia University, New York Kevin O’Rourke, Trinity College, Dublin July, 2010 An earlier version of this paper was presented at the Yale- Princeton Conference on Trade and War, April, 2010. We are grateful to the participants at that conference and especially to the editors of this volume, Michelle Garfinkel and Stergios Skaperdas, for helpful comments. War, Trade and Natural Resources Ronald Findlay and Kevin H.O’Rourke War and Trade are two human activities that are so intrinsic to the species that it is impossible to assign any moment in its evolution at which either of them first “appeared”. Every stage of socio-political evolution, from hunting and gathering to agriculture and animal husbandry and on to the commercial and industrial nations of today, has seen people conducting trade and warfare, both within their own boundaries and across them. The object of both Trade and War, or “Warre” as Thomas Hobbes more emphatically labeled it, has for most of the time been access to and control over scarce “Natural Resources”, differing only in the means by which this is to be achieved. Trade attempts to secure access to the fruits of the natural resources possessed by others by offering something of value in return, frequently the products obtained from the different bundle of natural resources in one’s own possession, thereby making both parties “better off”. War, on the other hand, attempts to do this by using force to deprive the other of the resources at his command, without offering anything of value in return. The use of force, however, itself requires the input of the user’s own scarce resources. Thus both War and Trade, from this perspective, are but alternative options to convert one’s own scarce resources into those of the other in a manner that enhances one’s own welfare, the difference being that Trade also raises the welfare of the other while War reduces it. Which option will be taken, at any given moment, and to what extent, will of course depend upon the circumstances and the preferences of the agents with regard to the benefits, costs and risks involved. War and Trade can also be mutually supportive of each other in a rational calculus of statecraft such as that of the seventeenth century Mercantilists with their twin objectives of Power and Plenty, as so lucidly explained by Jacob Viner (1948) in his classic article. Here the state deploys force, or the threat of it, to create markets for final products and to secure sources of raw materials, thereby raising national output and revenue which in turn enhances the level of force that can be sustained. 2 Lionel Robbins famously defined economics as the study of the relationship between ends and scarce means that have alternative uses. This places the rational use of force squarely within the discipline, so that in principle economics should have just as much to say about War as it does about Trade. As we all know, however, the contributions of economists on trade vastly exceed anything they have ever said about war, with Adam Smith’s brilliant opening passages “Of the Expence of Defence” to Book V of the Wealth of Nations being a notable exception. Also worthy of note in this regard is the brief but suggestive formal discussion of international relations by Trygve Haavelmo (1954, p.91- 98) in which he makes the point that a country may choose to use some of its resources for “unproductive” or “predatory” purposes, to acquire goods by “grabbing” from others, requiring the others to in turn use their own resources “unproductively” in order to deter the aggressor, thus leading to an all-round reduction in global output. While students of trade may have had little to say about war, students of war have generally recognized that competition over scarce resources, particularly natural resources, has been the underlying cause of war from the emergence of humanity itself to the present day. This point of view has recently been made most forcefully and impressively by Azar Gat (2006) in a remarkable work on War in Human Civilization, that begins with fighting and aggression in the animal kingdom as the evolutionary prelude to human conflict from the Paleolithic to the present. We find it interesting that Gat’s history of war has had to deal with production and trade almost to the same extent as we have had to deal with war in our own contemporaneous book, Findlay and O’Rourke (2007) on Power and Plenty: Trade, War and the World Economy in the Second Millennium. War and trade are also intimately linked in the very well-known works of W.H. McNeill (1982) on The Pursuit of Power: Technology, Armed Force, and Society since AD 1000 and Charles Tilly (1990) on Coercion, Capital and European States AD 990-1990. Clearly these two seemingly contradictory aspects of humanity, conflict in the one case and cooperation in the other, are inextricably intertwined throughout the entire course of history. Given such a vast field to cover, what can we hope to usefully say in the space of a single chapter? Since any attempt to be comprehensive must obviously come at the 3 price of superficiality we choose to focus on putting forward sketches of two related analytical models that one of us has developed earlier in Findlay (1996) on “Territorial Expansion and the Limits of Empire”, and Findlay and Amin (2008) on “National Security and International Trade: A Simple General Equilibrium Model”, and applying them to some particular historical episodes. The “empire” model is first applied to three major empires across a wide span of time, the Romans, the Mongols and the European maritime empires that emerged after the fifteenth century European voyages of discovery. The “National Security and International Trade” model is then applied to the case of the “Global Cold War” between the United States and the Soviet Union, and then to the contemporary geopolitical scene in the final section. The objective is not to try to say anything substantively new about any of these momentous historical events, but to hopefully demonstrate that economic theory and history can usefully be applied to the unified treatment of war, trade and natural resources in relation to them. The Expansion of Empires The life cycle of empires can usefully be divided into three phases. These are (1) an initial expansionary phase in which the future imperial power exploits some “edge” that it has acquired in military technology or organization over surrounding peoples or states, bringing them under its dominion as either clients or subservient allies or directly incorporating and administering their territory; (2) a second phase of consolidation of the rule over the acquired lands and subject peoples in the “high” empire; and (3) a third phase of contraction, decline and fall under pressure either from resistance and rebellion of the subject peoples themselves or attacks from external forces and powers, combined with loss of internal cohesion and control. We will here be concerned almost entirely with the first of these phases, although some remarks will be made about the second and third. The “natural resource” that is involved in relation to empires will not so much be particular types of resources but rather the generic natural resource of “land”, which can encompass all particular varieties from agriculture to forestry and mining. From an economic point of view the concept of empire unifies the theme of the relationships between war, trade and natural resources in a historically very important way. Each successful empire seeks to maximize its defensible territorial extent by first 4 waging war, but then it has an enduring interest in maintaining peace across this domain to promote economic activity, trade and the exploitation of natural resources in order to provide the revenues necessary to maintain its armed forces and administrative services and promote the welfare of its elite members, as well as its ordinary citizens to whatever extent possible. Empires therefore always strive to maintain a peace or Pax within their own borders, while warily protecting them from rival empires, states or wandering marauders. Thus our history of the last thousand years of world trade in Power and Plenty is largely concerned with the struggles of empires to establish and maintain themselves while fostering trade within and also across their borders. On the other hand, the wars provoked by these very same attempts to create and preserve empires have often been the main causes of the disruptions of world trade throughout history, but particularly in the past century. We begin with the presentation of a simple formal model of “territorial expansion and the limits of empire” based on Findlay (1996), but extended in an important direction. The next three sections are brief discussions of three major historical examples, the Roman Empire of antiquity, the Mongol Empire of the middle ages and the Western European empires of the early modern era, considered in their collective aspect in relation to the rest of the world, rather than singly in relation to each of the nation-states involved. Each of these examples will be examined in relation to the model to see how it “fits” each case, however loosely or broadly. The literature on each of these historical cases, as well as of the comparative study of empires, is of course incredibly vast and there will be no futile attempt at comprehensiveness, though all relevant sources on which we have drawn for particular insights or evidence will be mentioned. The subject of empire has been given a fresh lease of life as a consequence of the events of September 11th, 2001, so it will be difficult not to make some observations on the historical experience of empires in relation to contemporary issues, following the example of Chua (2007), which is only the most recent of several notable attempts in this regard.
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